Interest free loan

It can give loan but however not advisable in case of interest free loan.

under section 227 one of the main duties of the auditor is to have a specific enquiry in to a few issues which includes 'whether the company has issued any loans prejudicial to the interest of the company".

As an auditor if you feel it is prejudicial you will have to state the same in the auditors report.

CARO also has similar provisions.

Section 372A of the Companies Act deals with Intercorporate Loans and Investments.

The Rate of Interest Charged on the Loans should not be less than the Bank Rate 

 prescribed by the RBI from time to time.

A Holding Company giving Loans, Guarantee, Security or making Investments in Its    

 Wholly Owned Subsidiary need to satisfy the above criteria.

A holding Co. cannot give interst free loan to its wholly owned subsidiary :) Section 327A of COmpanies Act :)

Agree with ashish :)

fully agree with ashish

agree with ashish

Kindly refer to Sec. 372A(8)(c) wherein loans made or guarantee given to wholly subsidiary companies is not covered by the provisions of Sec 372A.

Care has to be taken whether such transactions will be covered under Transfer Pricing provisions. Otherwise, a company can make such Interest free loans.